Dave Ramsey Said This Common Money Move Could Backfire on You. Is He Right?

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Dave Ramsey said you may regret having multiple credit cards to keep your utilization ratio below 30%. Read on to learn if that’s really such a bad move. 

The way you use your credit cards can affect your credit score in many ways. If you pay your cards on time, or example, this can help you earn a good credit score. The amount of available credit you use on your cards can also make an impact. Ideally, you will want to keep your credit utilization ratio to 30% or less of your available credit. This means if you have a $1,000 credit limit, you would not want to charge more than $300 on your card.

A low credit utilization ratio helps your credit score because it shows lenders you use debt responsibly and aren’t maxing out the credit available to you. But it can sometimes be hard to maintain if you’re using your card a lot. That’s why some people sign up for multiple cards — so they have more available credit than they need.

Finance expert Dave Ramsey isn’t a fan of this technique, though. In fact, he believes it could backfire on you. Here’s why.

Having multiple cards to maintain a low utilization ratio

Ramsey warns against signing up for multiple credit cards to maintain a low utilization ratio for one simple reason: He believes it can set you up for more financial trouble than it is worth.

“People will often have multiple credit cards as a way to borrow more money without ‘overusing’ their credit limit — in order to increase their credit score,” Ramsey said. “The problem is that it can get out of hand real fast. Multiple credit cards means multiple payments. And it only takes one missed payment to send you spiraling into credit card debt.”

Ramsey’s concern is that you won’t be able to manage having several different cards at once, so something could slip through the cracks. And if you do happen to forget a payment because you have so many cards, it could have a much more detrimental effect on your finances than having a higher utilization ratio would in the first place.

Should you listen to Ramsey?

Ramsey is absolutely right that it does not make sense to open multiple credit cards for the purpose of maintaining a low utilization ratio to help your score — if you aren’t responsible with the way you use those cards.

If you sign up for too many cards, can’t handle keeping tabs on all of them, and don’t make payments on time, you’ll do far more harm than good to your credit. But the reality is, it is pretty easy to avoid this while still opening and maintaining several cards to help you get that coveted low utilization ratio.

See, you can open multiple cards and very rarely use some of them. That would really help your utilization ratio, since you’d have a credit limit with no charges on the card. You do need to use each card once in a while to avoid having it closed by the card issuer, but that’s as simple as putting one purchase on the card every six months or so and paying it off in full.

Ramsey’s assuming you can’t be trusted not to make a basic mistake with multiple credit cards, but many people absolutely can ensure they make payments on several cards on time. If you trust yourself to do that and you want to have some wiggle room so you can charge a lot on a card temporarily without hurting your credit score with a high utilization ratio, you may very well want to have multiple cards to protect your credit.

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